topic Re: Should I take out student loans to pay off my auto loan??? in Auto Loans

Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 29 Sep 2009 19:38:31 GMT

Hello,

I work full-time and just purchased a new Honda about 6 months ago. I have an auto loan out for about $13,000 at 8.9%.

I just landed back into full-time school as well, and it is 100% paid for by my grants. I just realized that leaves me with a significant amount of loan $$ available to accept and completely pay off my car with.

Good idea? Terrible idea?

I already have 6k and 2k student loans out from college two years ago. One is 5% and one is 6%.

The student loans I would accept would be a $6000 unsub loan and a $3500 sub loan - I'd just go ahead and pay off the rest of the car with cash.

I'm leaning towards doing this as I would have no interest on one for awhile, and the other would be tax deductible...

Someone stop me if this is a bad idea!

Re: Should I take out student loans to pay off my auto loan???

llecs — Tue, 29 Sep 2009 19:46:42 GMT

If I was in that situation, I would PIF my car loan.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Sat, 03 Oct 2009 12:51:56 GMT

@Anonymous wrote:
Hello,

I work full-time and just purchased a new Honda about 6 months ago. I have an auto loan out for about $13,000 at 8.9%.

I just landed back into full-time school as well, and it is 100% paid for by my grants. I just realized that leaves me with a significant amount of loan $$ available to accept and completely pay off my car with.

Good idea? Terrible idea?

I already have 6k and 2k student loans out from college two years ago. One is 5% and one is 6%.

The student loans I would accept would be a $6000 unsub loan and a $3500 sub loan - I'd just go ahead and pay off the rest of the car with cash.

I'm leaning towards doing this as I would have no interest on one for awhile, and the other would be tax deductible...

Someone stop me if this is a bad idea!

Read the promissory note. If you're dealing with Stafford loans, that is against the terms of the contract. The money from the loan can only be applied to school related expenses.

Although, you can probably get away with it.

Re: Should I take out student loans to pay off my auto loan???

marty56 — Mon, 05 Oct 2009 09:33:07 GMT

Give the money back.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Mon, 05 Oct 2009 17:15:08 GMT

As a student myself I have looked into the same thing. Student Loans are used to cover college expenses. When they factor that in they factor in a transportation cost. You can use this loan money for your means of transportation. Its a better interest rate than your car loan I would go for it but thats just my .02.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Mon, 05 Oct 2009 17:38:40 GMT

Wow marty, I'm not sure what "super contributor" means, but based on your tremendously insightful post.... I imagine not much. Can you further explain what you mean by "Give the money back" or are you too busy getting your post count up posting other words of wisdom?

reflected,

Compare interest rates. If you can pay off your car loan by accepting lower interest student loans then do it. Then apply what you were paying towards your car to your unsub loans with the goal of having those paid off when school is finished so you can then transition into paying off your sub loans.

Re: Should I take out student loans to pay off my auto loan???

haulingthescoreup — Tue, 06 Oct 2009 01:26:17 GMT

Hello, buckeye25osu (life must be confusing during NCAA football):

Welcome to the forums!

Please go back and read the User Guidelines and Terms of Service threads.

Sarcasm isn't welcome here on the boards.

If you were to read enough of marty's posts, you would realize that he's usually pretty terse in his replies.

Re: Should I take out student loans to pay off my auto loan???

marty56 — Tue, 06 Oct 2009 01:32:50 GMT

For the OP. Giving the student loan money back I see is a win win situation. Getting stuck with student loan debt can cause a problem down the road because that type of debt may not be BK'able and the money goes back to help someone else.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 06 Oct 2009 03:56:41 GMT

in general since you claim to be both a student and working full time taking extra loans out for the car payment is not the best decision.

I know people who saddled themselves with tens of thousands of dollars in student loan "extras" who have full time carrers and wait tables part time to help pay the student loan payments.

yep I know a prosecuter to a major city, over a hundred forty k in SLs who waits tables three cities over to help sustain his quality of life since his student loan payments are more then his rent.

Re: Should I take out student loans to pay off my auto loan???

haulingthescoreup — Tue, 06 Oct 2009 11:38:37 GMT

Yikes, good point.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 06 Oct 2009 15:21:51 GMT

Ok, sorry for the sarcastic post above.

I really don't agree with what some of you are saying. What reflected is proposing she do is trade her higher interest bank loan for government student loans. Aside from the interest rate reduction, student loans through the government have many other benefits. If the OP ever falls on hard times she can go into forbearance. She can defer her subsidized loans until after school. If she misses a few payments (very bad idea of course) the government won't repo her car like the bank would. This seems like the true WIN/WIN to me. Keep in mind she is basically replacing one loan with two much better ones of equal amount. Am I missing something?

Message Edited by buckeye25osu on 10-06-2009 08:21 AM

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 06 Oct 2009 17:13:59 GMT

I agree 100% with buckeye. And Marty you said that she cant include student loans in BK down the road. Should she be planning for a BK? I have never thought about getting a loan and saying well what if I file BK? If you base your life off of what will happen if I file BK then you have problems in my book. She wins on a MUCH lower interest rate. Not to mention the forbearance and grace periods. And in your negative outlook if she filed BK she would lose the car like Buckeye said if you fall behind on student loans they dont repo your belongings. This is a win/win for using the student loan. Go for it save yourself the money.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Wed, 07 Oct 2009 02:34:43 GMT

@Anonymous wrote:
Ok, sorry for the sarcastic post above.

I really don't agree with what some of you are saying. What reflected is proposing she do is trade her higher interest bank loan for government student loans. Aside from the interest rate reduction, student loans through the government have many other benefits. If the OP ever falls on hard times she can go into forbearance. She can defer her subsidized loans until after school. If she misses a few payments (very bad idea of course) the government won't repo her car like the bank would. This seems like the true WIN/WIN to me. Keep in mind she is basically replacing one loan with two much better ones of equal amount. Am I missing something?

Message Edited by buckeye25osu on 10-06-2009 08:21 AM

The OP, by their admission, has a very small loan at a very reasonable rate: 13K at 8.9% means they have a payment under 270 a month.

The OP says they are still working ful time and going to school.

It really does not matter if they roll it into a student loan or keep making payments.

Me personally: I loathe seeing people roll completely unnecessary expenses into student loans. Its a slippery slope.

As stated I have one friend that has a "big boy" job but has to wai ttable as he over indulged in student loans and now owes more then you could pay for a decent house in a Cleveland suburb.

I have another who overtook student loans to subsidize her entire life, and wedding her senior year. yep tens of thousands of dollars.

And another in graduate school who lives a lifestyle she cannot afford other then student loans in a single bedroom apartment that's twice the rent as mine.

It all has to be paid sometime.

If next year or later on the op was in the position to need it, ok i understand.

But right now I just do not see it as an issue.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Wed, 07 Oct 2009 15:42:35 GMT

usmc,

I agree with what you're saying about student loans being a slippery slope. And that's true if someone starts using them for every day expenses, vacations, gifts, televisions, etc. But the OP is replacing a current loan with one of a better rate. The car has already been "purchased".

Re: Should I take out student loans to pay off my auto loan???

laz98 — Sat, 07 Nov 2009 01:30:52 GMT

i see people use student loans for dumb stuff all the time. at least you would be doing something responsible with it.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 24 Nov 2009 15:22:16 GMT

Although buckeye's comment to marty may have been too sarcastic, it was somewhat understandable, since marty's comment was not just terse, it was off base. marty said "give the money back", but there's no money to give back, no extra SL's have been taken out yet.

So to me as well, marty's post does not appear to be applicable or useful.

Re: Should I take out student loans to pay off my auto loan???

llecs — Tue, 24 Nov 2009 15:36:51 GMT

BitDreamer wrote:
Although buckeye's comment to marty may have been too sarcastic, it was somewhat understandable, since marty's comment was not just terse, it was off base. marty said "give the money back", but there's no money to give back, no extra SL's have been taken out yet.

So to me as well, marty's post does not appear to be applicable or useful.

I take back my org. response and have to go with Marty on this one. His follow-up makes sense as does the subsequent poster's. The OP had both grants and loans, and being flushed in excess cash, as indicated, has the ability to return some of that.

Edited to clarify....it is true that OP didn't take the $$$ yet, but if he/she had, some of that money could have been returned to close out the loan if accepted or to pay back the grant.

Message Edited by llecs on 11-24-2009 10:36 AM

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 24 Nov 2009 15:48:00 GMT

You should only even consider this if you plan on paying the loan immediately. Getting a better rate by a couple points and deffering interest and priciple would drastically worsen the situation.... Pretty sure this is obvious, but just thought I'd say.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 24 Nov 2009 19:13:14 GMT

llecs (Moderator) wrote:

> The OP had both grants and loans, and being flushed in excess cash, as indicated, has the ability to return some of that.

This is steering even further from the facts of the original question. The OP has the opportunity *not yet exercised* for additional student loans.

The question: should these NEW student loans be taken to pay off the car?

OP wrote:

> I'd just go ahead and pay off the rest of the car with cash.

One must assume the OP has $3500 cash or access to it.

One should not assume this money is from the previous student loans - those were for college two years ago, and the OP has a full time job now.

Maybe some people have taken that next step to say that anyone with extra cash should always pay it on student loans before anything else??

llecs (Moderator) wrote:

> it is true that OP didn't take the $$$ yet, but if he/she had, some of that money could have been returned to close out the loan if accepted or to pay back the grant.

I am really confused by this. Why would the OP take out a student loan in order to pay off that self-same student loan? And how to you pay back a grant?

usmc58555 wrote:
> in general since you claim to be both a student and working full time taking extra loans out for the car payment is not the best decision.

I think there's a misunderstanding here. The extra loans would not be to make month-to-month car payments, they would pay off the car. All of usmc58555's advice is solid advice, but doesn't apply here. In fact, the OP is looking at having LESS total debt, and lower payments.

And I write:

I think there are only two answers to the OP's question.

Either a) - Yes, take out the new student loans and pay off the car loan
Or b) - No, do not take out the new student loans to pay off a car loan

Here is one way to look at the Yes answer.
I am sure you filled out the FAFSA. This resulted in various figures - grants, sub loans, unsub loans, but each figure are the amounts you are legitimately allowed, because you ARE going to school.
When you get the student loan you will be putting it in the bank. Probably the same account you have your other money in. I'm pretty sure that you WILL be spending money on books, etc. At this point, to say "No that dollar cannot be spent on that thing" is a little invasive.

I'm sure other opinions will vary.

Re: Should I take out student loans to pay off my auto loan???

Anonymous — Tue, 24 Nov 2009 19:32:31 GMT

Points to consider in this "debate:"

- money is fungible

- "need" is subjective

- the student may elect to work less and take loans out to cover the difference

- expenses are more than tuition and books

Much of the debate I read appears to be moral differences of opinion on the "proper" use of student loans.